Paying off student loans quickly will save you money on interest. Here are five strategies you can use to pay off your student loan debt quickly.
Living with student loan debt can be stressful. This puts a strain on your budget and may prevent you from achieving your financial goals, such as buying a house or saving for retirement. But you can pay off student loans fast.
The sooner you pay off your student loan debt, the less interest you will pay over the life of the loan. And removing student loan stress from your life can also improve your mental health.
Refinancing is one way to pay off student loan debt faster. Visit Faithful to learn more about student loan refinancing and compare rates from several private student loan lenders.
5 ways to pay off student loans faster
If you have student loan debt, you don’t have to spend decades paying it off. With the right strategies, you can pay off student loans much faster – even before the end of the repayment period. Here are five ways to pay off student loans quickly.
1. Pay more than the minimum every month
You will have to make more than the minimum payment each month if you want to pay off your debt. If you don’t have a lot of extra money to pay off your debt, don’t worry – even an extra $50-100 per month will help you make progress.
You can also start making biweekly payments instead of monthly payments. With biweekly payments, you will pay off the loan every two weeks. You won’t feel like you’re overpaying, but this strategy means you’ll end up making one extra payment per year.
It’s a good idea to automate your monthly payments so that your lender automatically deducts your payments from your account. Not only does this ensure that your student loan payments are made on time, but many loan providers offer an interest rate discount for automatic payments.
2. Pay off capitalized interest
Capitalized interest occurs when unpaid interest is added to the principal amount of a student loan. This increases your overall student loan balance, which means you’ll pay even more interest in the future.
Capitalized interest usually accrues at the time of loan resignation or during your grace period after college. Paying off this capitalized interest can reduce your total loan amount and allow you to repay your debt sooner.
3. Avoid extending the repayment period
If you have federal student loans, one of the benefits of participating in an income-focused repayment plan is that it helps make your monthly payments more affordable. IDR plans increase the time it takes to pay off your loans in full. If you apply for a deferment or forbearance, this will further expand your repayment window.
But it also means that you will end up paying your loans for longer. If your goal is to pay off your loans as quickly as possible, you may want to avoid IDR plan payments.
4. Consider Refinancing
When you refinance, you replace your current loans with a new private loan with different rates and terms. Refinancing can help pay off student loans faster by lowering the interest rate or shortening the repayment period. To qualify for refinancing, you will need a good credit score, stable income, and a low debt-to-income ratio.
You can refinance federal loans, private loans, or a combination of the two into a new private loan. But be aware that if you refinance your federal student loan into a private student loan, you will lose federal benefits such as loan deferrals and loan forgiveness.
If your goal is to pay off student debt faster, be careful not to extend the repayment period. Refinancing with a longer repayment term will give you a smaller payment amount, but will increase your overall interest costs and the time it takes to pay off your loans.
Reliable makes it easy compare student loan refinancing rates from multiple lenders without affecting your credit score.
5. Get help paying off student loans
You can access other resources to help you pay off your student debt Faster. For example, ask your employer if they offer any student loan benefits. Some plans offer employees up to $5,250 a year in student loan repayments, but this varies by employer.
Some professions may even be eligible for loan forgiveness. For example, Government Loan Forgiveness Program available to federal student loan borrowers working full-time in a qualified government or non-profit organization. After you make 120 qualifying payments under your income-based repayment plan, the rest of the loan will be forgiven.
And you can qualify for a student loan exemption if you have a total and permanent disability. To be eligible for complete and permanent disabilityyou will need to fill out an application and provide the required documentation.
Reasons why paying off student loans early is a good idea
Paying off student loans early has a number of benefits, including:
- Reduce stress – Research has shown that student loan debt can lead to long-term stress and mental health problems. Borrowers may wonder if the cost of their degree was worth it. Paying off your student loans quickly will reduce that stress and free up space in your budget.
- Pay less interest The longer you carry student loan debt, the more interest will continue to accrue. Paying off a loan before maturity can save you a lot of money in interest.
- Improve your debt-to-income ratio – Getting rid of student loan debt will improve your debt-to-income ratio. This is the percentage of your monthly income that goes towards paying off debt and is a major factor in things like buying a house.
- Achieve other financial goals — By paying off student debt, many borrowers are forced to put off important life milestones, such as buying a house or starting a family. By paying off student loans early, you can pursue other financial goals.
To start refinancing student loans, visit the Credible website and compare advance rates from multiple creditors.
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